Opinion
No. C7-00-1845.
Filed June 19, 2001.
Appeal from the District Court, Dakota County, File No. P0987817.
Edmund C. Meisinger, (for appellants)
Ward R. Anderson, Virginia A. Dwyer, Grannis Hauge, P.A., (for respondent)
This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2000).
UNPUBLISHED OPINION
Appellants challenge the exclusion of two certificates of deposit (CDs) from the estate of Dorothy Klossner and the district court's denial of their motion for attorney fees. Because the record supports the district court's determination that Klossner intended respondent James Wells to have the CDs pursuant to the statutory right of survivorship and that Wells did not breach his fiduciary duty, we affirm exclusion of the CDs from Klossner's estate. Because appellants' acts did not benefit the estate, we affirm denial of attorney fees.
FACTS
The decedent Dorothy Klossner died on June 23, 1997, at the age of 89, with no surviving, close relatives. In her 1996 will, Klossner devised 50% of her estate to James Wells, 25% of her estate to appellant Loretta Johnson, and 25% of her estate to appellants Evelyn and Fred Wohlers. Wells, Johnson, and the Wohlers are unrelated to Klossner, but each had a long-term friendship with her.
After her husband's death in 1993, Klossner moved to Texas and gave power of attorney over her substantial assets to two friends there. Klossner became dissatisfied with that arrangement, and after Wells assisted her in resolving that matter, she moved back to Minnesota.
Thereafter, Klossner sought Wells's advice in managing her financial and legal affairs and in retaining an attorney to draft a will in 1996. Klossner designated Wells as personal representative. Although Wells held a power of attorney for Klossner, he never used it.
Wells asserts that before he would agree to help Klossner, he asked her if he could tape their business phone calls. He taped two conversations between himself and Klossner, and one conversation between himself and appellant Evelyn Wohlers. Transcripts were made of these tapes and entered into evidence at trial.
On November 22, 1996, Klossner opened two accounts with TCF Bank for two CDs of approximately $100,000 each. Klossner was named as owner in trust for Wells on one account, initially to ensure that both accounts would be FDIC-insured. Later, both CDs were designated by Klossner as "in trust for" Wells. Wells testified that he had explained to Klossner that the effect of this designation was that this money would not be included in the will but would go directly to him.
In early spring of 1997, Klossner was diagnosed with lung cancer. During April 1997, Klossner's cognitive abilities, thinking process, and judgment became substantially impaired. On April 1, 1997, while Wells was out of state, Klossner changed the beneficiary of one of the CDs to appellant Loretta Johnson. On April 17, 1997, Klossner re-designated Wells as beneficiary. Both CDs were held in trust for Wells when Klossner died two months later.
Appellants challenged the exclusion of the CDs from the estate. After a bench trial, the district court dismissed Johnson's objections, finding that Klossner intended to leave both CDs to Wells upon her death and that although Wells had a fiduciary relationship with Klossner, he did not violate that duty. The district court denied appellant's motion for amended findings and attorney fees. This appeal followed.
DECISION
Appellants challenge the district court's dismissal of their objections and denial of their motion for attorney fees. Appellants argue that the CDs should be included in the Klossner estate because Wells breached his fiduciary duty to Klossner by exercising undue influence over her and failing to make full disclosure and because the presumption in favor of a right of survivorship does not apply.
1. Fiduciary Duty
Appellants argue that Wells breached a fiduciary duty by exercising undue influence over Klossner and failing to make full disclosure of the consequences of making him the payee of the CDs.
The existence of a fiduciary relationship is a question of fact. May v. First Nat'l. Bank, 427 N.W.2d 285, 289 (Minn.App. 1988), review denied (Minn. Oct. 26, 1988). We will not set aside findings of fact unless clearly erroneous. Minn.R.Civ.P. 52.01. A fiduciary relationship is created when the evidence shows that one party "enjoyed superior or excessive influence over the decedent." May, 427 N.W.2d at 289 (citations omitted). A confidential relationship combined with greater access to facts and legal resources forms a fiduciary relationship. Id.
The district court found that a fiduciary relationship existed between Wells and Klossner. Klossner was elderly, sick, and experienced decreased judgment due to medication and pain. She relied increasingly on Wells for legal and financial advice. Wells referred the attorney who drafted Klossner's will, and Wells spoke with bank representatives regarding Klossner's financial affairs. Klossner had previously allowed others to manage her affairs. Wells had superior influence over Klossner and greater access to her financial and legal resources. Wells and Klossner had a fiduciary relationship.
Appellants argue that Wells breached his fiduciary duty by exercising undue influence over Klossner. The existence of undue influence is a question of fact, and the district court's findings will be set aside only if they are clearly erroneous. In re Estate of Rechtzigel, 385 N.W.2d 827, 832 (Minn.App. 1986).
Appellants have the burden of proving undue influence by clear and convincing evidence. See In re Estate of Reay, 249 Minn. 123, 126, 81 N.W.2d 277, 280 (1957). Undue influence is usually demonstrated through circumstantial evidence. Norlander v. Cronk, 300 Minn. 471, 475, 221 N.W.2d 108, 111 (1974). Several factors aid in finding undue influence in making testamentary decisions: (a) the alleged influencer had the opportunity to exercise such influence and actively participated in the will preparation; (b) a confidential relationship existed between the testator and the alleged influencer; (c) those who probably would have been remembered were disinherited; (d) the will provisions are consistent with each other; and (e) influence or persuasion caused the testator to make the will. In re Estate of Opsahl, 448 N.W.2d 96, 100 (Minn.App. 1989). Any one of the factors or a combination of any of these factors will not establish undue influence by clear and convincing evidence, but rather something more is needed:
The evidence must go beyond suspicion and conjecture and show, not only that the influence was in fact exerted, but that it was so dominant and controlling of the testator's mind that, in making the will, [s]he ceased to act of [her] own free volition and became a mere puppet of the wielder of that influence.
Reay, 249 Minn. at 126-27, 81 N.W.2d at 280.
The district court found that Wells did not exercise undue influence because no evidence indicated Wells was inclined to unduly influence Klossner and that Wells correctly informed Klossner that the CDs would not be included in her estate and he would receive the CDs by right of survivorship. The district court found that the taped conversations between Wells and Klossner showed that Wells allowed Klossner to freely designate a beneficiary without pressure:
[Wells:] Well, I mean if you want to leave that to her instead, that's fine. I mean I want you to do what you want to do.
[Klossner:] Well, I'm not going to leave her any $100,000.
That's what she's asking. I told you that before.
* * * *
[Wells:] Well, I would never hold it against you.
[Klossner:] After all, all the things that you've done for me, no thank you.
The district court's finding that Wells did not assert undue influence over Klossner is not clearly erroneous.
Appellants also argue that Wells failed to fully disclose that, as a result of naming Wells as beneficiary on the CDs, he would receive a greater percentage of her net worth than the 50% devised to him in her will. The presumption of ownership by surviving parties to the account does not exist if the account was created through a violation of a fiduciary duty. Hopper v. Rech, 375 N.W.2d 538, 542 (Minn.App. 1985) (citing In re Estate of Nordorf, 364 N.W.2d 877, 880 (Minn.App. 1985)), review denied (Minn. Dec. 30, 1985). One acting in a fiduciary capacity owes the principal a duty of full disclosure. Id.
In Nordorf, the beneficiary failed to disclose to the decedent that if decedent signed signature cards, all funds would go to the beneficiary. 364 N.W.2d at 880. The district court found that this case is similar to Nordorf but that here Wells disclosed to Klossner that the CDs would go directly to him and would not be included in her estate. Appellants argue that Klossner did not truly understand that Wells would receive such a substantial portion of her net worth. Distribution of net worth is irrelevant. Klossner clearly understood that the money in her CDs would not be included in her estate and that appellants would not receive sums from those accounts. The district court's finding that Wells made full disclosure to Klossner is not clearly erroneous.
2. Minn. Stat. § 524.6-204 (2000)
Sums remaining on deposit at the death of a party to a joint account are presumed to belong to the surviving party:
If the account is a P.O.D. account, on the death of the original party or of the survivor of two or more original parties, any sums remaining on deposit belong to the P.O.D. payees if surviving, or the survivor of them if one or more die before the surviving original party * * * .
Minn. Stat. § 524.6-204(b) (2000). The right of survivorship exists only if the account is in the correct statutory form. See In re Conservatorship of Gobernatz, 603 N.W.2d 357, 360 (Minn.App. 1999), review denied (Minn. Feb. 15, 2000). A P.O.D. account is defined as
an account payable on request to one or more parties and on the death of the parties to one or more P.O.D. payees. The term also means an account by the name of one or more parties as trustee for one or more beneficiaries where the relationship is established in the form of the account and the deposit agreement with the financial institution and there is no subject of the trust other than the sums on deposit in the account. A P.O.D. account does not include a trust account established under a testamentary trust or inter vivos trust, or a fiduciary account arising from a fiduciary relationship such as attorney-client.
Minn. Stat. § 524.6-201, subd. 10 (2000) (emphasis added).
Appellants argue that the CDs should not be included as P.O.D. accounts under the statute, because the accounts arose from the fiduciary relationship between Klossner and Wells. Appellants then assert that Wells can only claim entitlement to the accounts if he establishes that Klossner made a gift to him of the accounts before her death. Wells has never asserted that Klossner made such a gift to him. Klossner was concerned about having enough money for her own expenses and there is no evidence that she intended to make a gift. Contrary to appellants' assertions, gift analysis is irrelevant to this action. The district court correctly found that Klossner intended the CDs to pass to the payee at her death.
Although Wells and Klossner had a fiduciary relationship, the CDs in this case did not arise from that fiduciary relationship. Cf. Minn. R. Prof. Conduct 1.15 (requiring all funds of clients or third persons held by a lawyer or law firm in connection with a representation shall be deposited in one or more identifiable interest-bearing trust accounts). Wells did not have access to the accounts or possession of the CDs and he never held the money for Klossner. The CDs are valid P.O.D. accounts, not excluded by statute from the presumption of a right of survivorship in favor of the payee Wells.
3. Attorney Fees
Finally, appellants argue that they are entitled to attorney fees, because their objections were brought for the benefit of the estate. This court will not reverse the district court's award or denial of attorney fees absent an abuse of discretion. Becker v. Alloy Hardfacing Eng'g Co., 401 N.W.2d 655, 661 (Minn. 1987).
Minnesota law provides for attorney fees when an attorney's actions benefit the estate:
When after demand the personal representative refuses to prosecute or pursue a claim or asset of the estate or a claim is made against the personal representative on behalf of the estate and any interested person shall then by a separate attorney prosecute or pursue and recover such fund or asset for the benefit of the estate, or when, and to the extent that, the services of an attorney for any interested person contribute to the benefit of the estate, as such, as distinguished from the personal benefit of such person, such attorney shall be paid such compensation from the estate as the court shall deem just and reasonable and commensurate with the benefit to the estate from the recovery so made or from such services.
Minn. Stat. § 524.3-720 (2000). "Services" other than will contests must be found to benefit the estate before expenses are recoverable. In re Estate of Evenson, 505 N.W.2d 90, 92 (Minn.App. 1993). Appellants' attorney is not entitled to fees under the statute, because their objections did not benefit the estate. The district court did not abuse its discretion in denying attorney fees.